Apple: Stock Research Analysis

964 Words Oct 26th, 2012 4 Pages
Apple: Stock Research Analysis

Apple (AAPL) is one of the most high profile stocks in the world. Regarding its valuation, people are often confused by its high price. Even though the price is high, Apple's valuation is significantly lower than its historical earnings growth rate and, more importantly, its forecast growth. Consequently, we believe that this high-profile growth stock that has recently began paying a dividend is undervalued at these levels.

About Apple, taken directly from its website:

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile
…show more content…
However, since Apple has just begun paying a dividend, we are not yet including any dividends in our performance calculation.

The following graph plots the historical P/E ratio (the dark blue line) in conjunction with 10-year Treasury note interest. Notice that the current P/E ratio on this quality company is as low as it has been since 1998.

A further indication of valuation can be seen by examining a company's current price-to-sales ratio relative to its historical price-to-sales ratio. The current price-to-sales ratio for Apple is 4.30, which is historically normal.

Looking to the Future

Extensive research has provided a preponderance of conclusive evidence that future long-term returns are a function of two critical determinants:

1. The rate of change (growth rate) of the company's earnings

2. The price or valuation you pay to buy those earnings

Forecasting future earnings growth, bought at sound valuations, is the key to safe, sound, and profitable performance.

The Estimated Earnings and Return Calculator Tool is a simple yet powerful resource that empowers the user to calculate and run various investing scenarios that generate precise rate of return potentialities. Thinking the investment through to its logical conclusion is an important component toward making sound and prudent commonsense investing…

More about Apple: Stock Research Analysis